Charles Abuede
The African Development Bank (AfDB) said it is involved in a joint partnership with other global syndicates of commercial and development financial institutions to finance the $20 billion Mozambique Liquefied and Natural Gas (LNG) project with a $400 million senior loan signing. The project is regarded as the single largest foreign direct investment in Africa till date.
The announcement comes few days after Total, Bharat Petroleum, Mozambique’s national oil and gas company and other global teams of energy operators and developers came together to append signatures to the financing of the project estimated to cost over $20 billion.
Speaking on the loan signing, Abdu Mukhtar, director of AfDB’s industrial and trade development department, noted that endorsing the Mozambique LNG Area 1 agreement announces a new era of industrialization for Mozambique, as gas purchasers have the potential for improving competitiveness in the region as well as globally, such as fertilizer plants.
According to the statement by the AfDB, the project, which benefits from one of the world’s largest natural gas reserves, off the coast of northern Mozambique, will be the country’s first liquefied natural gas development. It will initially consist of two LNG trains with a total capacity of around 13 million tonnes annually.
In a related development, the bank along with other financiers will be involved in funding the onshore and offshore components of the project by a combination of:
- Equity,
- Export Credit Agency (ECA) direct loans,
- Commercial bank loans and loan facility from the AfDB,
- Pre-completion cash flows and over $14 billion in senior debt facilities.
“Through the availability of domestic gas, the project stands to facilitate the development of gas-fired electricity in Mozambique. This will play a key role in providing reliable and affordable energy for the country and the wider region,” said Wale Shonibare, director for energy financial solutions, policy and regulations of the AfDB. He also stressed that the project will create a new energy model in the country and also help electrify South Africa.
Souley Amadou, the bank’s acting general counsel, commenting on the project financing, said “This is first in a class transaction that sets a new standard for mega-projects on the African continent. The collaboration and unity of purpose between the sponsors, government of Mozambique, the financing parties and advisors were truly remarkable.”
AfDB experts, who analyzed the transaction, lauded the move by the bank and its funding partners, noting that the project is in line with the institution’s High 5 strategic priority. They say it will:
- Boost universal electricity access,
- Offshoot growth economically, and
- Improve livelihoods.
